Terminating Employees for Performance Reasons

One area I am frequently asked to provide advice on is the subject of employee terminations. Generally, employment in California is “at-will,” meaning that an employee can quit, or the employer may fire the employee, at any time, for any reason, with or without cause.  (There are limited exceptions to this, such as if an employee has an employment agreement that specifies employment for a guaranteed number of years, or allows termination only for cause.) However, the reality is that employers should always have a sound business reason for any termination decision, because if an employee later sues the company for discrimination, retaliation, or wrongful termination, the company will have to prove the termination decision was not based on an unlawful reason (such as due to the employee’s age, race, religion or gender). The best way to establish this is by pointing to sound business reasons tied to concrete facts and documentation that back up the termination decision.

One question I always pose when a client asks me if they have good grounds for firing an employee is, “How is this going to look to a jury?” Sometimes, this is pretty easy to answer, such as when an employee is caught falsifying their time records, stealing from the company, or engaging in threatening behavior against coworkers. It gets trickier when the employer wants to fire an employee for performance reasons where any one reason taken in isolation would not amount to a great reason for termination.

Take for example, an employer who wants to fire an employee after the company’s president receives an angry phone call from an important customer complaining that the employee had not been returning his emails about a pressing matter. Let’s also assume that while the customer was pretty upset, there was no real harm done. If this employer were my client, I would advise against firing the employee based on these circumstances, because it is an isolated incident that did not result in any real harm. Instead, this would be an issue that could be handled by verbally counseling the employee or issuing a written warning.

But now let’s assume that this same employee had been repeatedly counselled about the importance of timely returning customer calls and emails after the employer had fielded numerous customer complaints. In fact, the employer had twice issued a written warning to the employee in the past six months, putting him on notice that any further violations could lead to termination. In this situation, the employer would be on much more solid footing to carry out the termination because they had attempted to address the problem behavior with the employee, they documented their efforts to do so with written warnings, and they provided the employee an opportunity to improve.

Of course, every situation is different and must be judged on the particular circumstances. There are some circumstances where immediate termination is warranted even if the employee otherwise has had a stellar record. But in my experience, those situations tend to be few and far between. The typical scenario occurs where the employer wants to fire the employee for performance issues which taken on their own may not be a terminable offense. In this more typical situation, the employer is best positioned to terminate the employee when they can demonstrate that the employee had previously been put on notice of their deficient performance issues, the employee was given the opportunity to improve, and the employer had issued written warnings documenting these steps.

Employer Action Items:

• Before firing an employee, ask yourself (and the other decision makers), “How would this look to a jury?” If an employee is alleging discrimination or wrongful termination, you’ll have to prove that the termination was due to a legitimate, non-discriminatory reason. Terminating an employee for making a clerical error that resulted in no real harm and where the employee had been given no prior warnings is probably not going to go over well with a jury.
• Find out if the employee had previously been put on notice of their performance issue(s) and given a reasonable opportunity to improve. They should have at least been given a verbal counseling, but a written warning that is placed in their personnel file is much better. If they have never been counseled for their poor performance before, instead of firing them, this may be a good time to issue a written warning.
• When in doubt, talk to experienced employment law counsel! I cannot count the number of times I have seen employers get hit with lawsuits (resulting in sizeable attorneys’ fees and settlements in the six figure range) that could have been avoided had someone just taken the time to have a five-minute discussion with an attorney to make sure the decision was sound. However, make sure you consult with counsel well versed in California employment law. I have seen clients get bad advice when they ask attorneys for employment law advice whose practice focuses on subject matters other than California employment law!